By Amanda Durish Cook

A three-year dispute over cost and revenue sharing for a CapX2020 transmission project moved one step closer to resolution after FERC last week approved a settlement between the city of Rochester, Minn., and the Southern Minnesota Municipal Power Agency.

The dispute concerns the Hampton-Rochester-La Crosse 161-kV and 345-kV transmission line between Minnesota and Wisconsin, which is intended to meet swelling demand in the Twin Cities, Rochester and La Crosse, Wis., areas. Rochester’s Public Utilities Board (RPU) is a 9% owner in the project, which is part of the CapX2020 joint initiative by 11 Minnesota utilities.

The settlement approves revisions to MISO’s Tariff incorporating RPU’s existing facilities in Pricing Zone 20 (the SMMPA pricing zone); converting the RPU transmission rate formula to a forward-looking formula rate template with an annual true-up; and adding RPU to Pricing Zone 16 (the Northern States Power pricing zone) (ER15-277-004).

Still remaining is a dispute between Rochester and Xcel Energy, which is challenging RPU’s proposed recovery of its transmission revenue requirement for the project from Pricing Zone 16. The settlement does not resolve whether any of those costs should be allocated to Zone 20 if it is determined that the costs do not belong in Zone 16.

In a related order, FERC rejected Xcel’s requested stay on RPU’s rate recovery until the line was in service, saying a stay would amount to a “collateral attack” on the commission’s refund effective date (ER15-277-001). FERC agreed with MISO that Rochester’s facilitates were already figured into the Zone 16 revenue requirement when Xcel filed the motion for a stay. As the host transmission owner of six other TOs in Zone 16, Xcel subsidiary North States Power receives and distributes revenues allocated to Zone 16.

“To grant the stay now would require recalculating the Zone 16 transmission rate and providing refunds,” FERC said. “We are also not persuaded that a stay would leave all parties indifferent, as it would cause a delay in [Rochester’s] recovery of costs. … Granting the stay — especially if it lasted until the resolution of the ongoing dispute, as Xcel suggests — could endanger RPU’s ability to recover its transmission revenue requirement for the 2016 year.”

The commission also declined to place Rochester’s share of Zone 16 transmission revenues in an escrow account until a settlement is reached, as Xcel requested.

Xcel charged that MISO’s collection of Rochester’s estimated annual transmission revenue requirement associated with the line in Zone 16 from Jan. 1, 2016, was not justified because MISO did not begin dispersing transmission revenues to Northern States Power until October, when the line was placed into service. Rochester argued that as a MISO TO, it has the right to recover revenue requirements for transmission facilities under the RTO’s control.

In response to Xcel’s request, FERC also clarified that RPU will be subject to refunds if the commission upholds a reduction in the return on equity for it and other MISO TOs. In October, FERC ordered the TOs’ 12.38% base ROE cut to 10.32%. Rehearing requests in the case are pending (EL14-12). (See FERC Cuts MISO Transmission Owners’ ROE to 10.32%.)

The commission also opened a new docket (EL17-44) to examine the Zone 16 joint pricing zone revenue allocation agreement, ordering Xcel and other interested parties to file initial briefs within 30 days after the publication in the Federal Register. FERC also sought briefing on whether MISO’s joint pricing zone agreement can circumvent recovery of commission-accepted transmission rates. Tariff revisions could be necessary, FERC said, as Xcel argued it could not distribute those revenues to Rochester without violating the terms of its joint pricing zone agreement.